Wage Determination

• What type of market is the labour market?

  Factor market
• Who determines the supply of labour?

  Those who want to be employed
• What is derived demand in the context of labour?

  Demand for labour comes from product demand
• If there is no demand for cars, what happens to car manufacturers' demand for labour?

  It decreases
• What factors relate to the demand for labour?

  Productivity and product demand
• How is the elasticity of demand for labour linked to product demand?

  It relates to price elasticity of the product
• What effect does the wage rate have on the supply and demand curves for labour?

  It causes movements along the curves

  
• What are nominal wages?

  Monetary value of wages
• How are real wages calculated?

  Nominal wages adjusted for inflation
• What does the downward sloping demand curve indicate about wage rates and employment?

  Higher wages lead to fewer workers employed

  
• What might firms consider if wages increase?

  Switching production to capital
• How does the demand for products affect the demand for labour?

  Higher product demand increases labour demand
• What increases the productivity of labour?

  Education, training, and technology
• What happens to the demand for labour if substitutes for labour are available?

  Demand for labour will fall
• How does a firm's profitability affect its demand for labour?

  Higher profits allow more labour employment
• What determines the number of buyers of labour in the market?

  The number of firms in the market
• How does a single employer affect the demand for labour?

  It lowers demand compared to multiple employers
• What is the supply of labour calculated by?

  Number of workers willing to work times hours
• How does the wage rate affect the supply of labour?

  Higher wages increase the number willing to work

  
• What demographic factors affect the supply of labour?

  Retirement ages, school leaving ages, immigration
• How does migration affect the supply of labour?

  It tends to increase supply at all wage rates
• What non-monetary advantages can influence the supply of labour?

  Childcare affordability and promotion potential
• How does leisure time affect the supply of labour?

  Leisure is a substitute for work
• What factors influence a person's choice between work and leisure?

  Age, taxes, dependents, income
• How can trade unions affect the labour market?

  They can attract workers by defending rights
• What effect do high taxes and generous benefits have on labour supply?

  They may discourage people from working
• How does training affect the supply of labour?

  High training requirements may reduce supply
• What happens to labour supply if the government subsidizes training?

  It may increase the supply of labour
• What does the elasticity of demand for labour measure?

  Responsiveness of labour demand to wage changes
• How does the cost of labour affect its elasticity?

  Higher costs increase demand elasticity
• What affects the elasticity of demand for labour?

  Labour cost proportion, substitutes, product PED
• What is the elasticity of supply of labour?

  Responsiveness of labour supplied to wage changes
• What factors affect the elasticity of supply of labour?

  Skills, training length, vocation, time period
• How does geographical immobility of labour affect employment?

  It prevents labour from moving between areas
• What is occupational immobility of labour?

  Obstacles preventing labour from changing occupations
• What caused occupational immobility in the UK mining industry?

  Lack of transferable skills after industry collapse
• What are the causes of occupational immobility?

  Insufficient education, training, and skills
• What determines labour market equilibrium?

  Where supply and demand for labour meet
• What happens to the wage rate when demand for labour falls?

  The wage rate falls from W to W1

  
• How does an increase in the supply of labour affect the wage rate?

  The wage rate falls from W to W1